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Monday, 30 March 15
WORST IS OVER FOR THE DRY BULK MARKET, BUT THE PAIN WILL REMAIN FOR YEARS TO COME, SAYS BIMCO CHIEF ANALYST - HELLENIC SHIPPING
 The current demise of the dry bulk market isn’t one to go away anytime soon. That doesn’t mean that it can’t improve, with all ship classes expected to cover their operating costs by May. Meanwhile, demolition activity isn’t enough, at least thus far, to offset oversupply of tonnage in the dry bulk market. It’s one of the reasons behind the downfall of the market in the past few months.
In an exclusive interview with Hellenic Shipping News Worldwide, BIMCO’s Chief Shipping Analyst, Mr. Peter Sand, said that the organization expects a fleet growth of 19m DWT for 2015, while already 8m DWT of bulkers have been scrapped. However, the market fundamentals remain negative, despite increasing demand during the current quarter. As Mr. Sand puts it, “we need multiple years of demand outstripping supply to turn the tables. The fact that demand may be fading somewhat now with China in an economical transition phase is not making prospects any better”.
Traditionally, the second quarter of the year signals the rebound of the dry bulk market, at least in terms of demand, with the grain/soya trades of South America kicking in. What’s your estimates about the demand side of the equation in the market going forward?
BIMCO is comfortable that demand for dry bulk ships is improving in Q2 as compared to Q1. Primarily due to increased volumes of soya and iron ore getting seaborne out of South America. Most focus will be on Brazil, with Argentina in a supporting role as soya exporter. It is positive for shipping volumes that Argentina is on track for a record harvest with 5% gathered already and the combined soybean production for Argentina and Brazil, as estimated by USDA, is to hit an all-time high at 150 million tonnes.
Nevertheless, we have to remain patient as regards to increased iron ore exports out of Brazil. In our recently published dry bulk market report we stated that Australia “won the battle” of increased sales to the Chinese in 2014. Additionally, “BIMCO expects that they will not let go of the lead in 2015, at the expense of long-haul shipping demand from Brazil.” Insight provided by Commodore Research & Consultancy supports this view – unfortunately.
For the full year, BIMCO expects demand a bit lower than estimated at the end of 2014. We are currently looking at 3-4% growth down from 4-5%. Key importer, China, is the main culprit behind this revision.
With the market plunging to all-time lows during February, do you think that the worst is behind us? Would you say that this time around, the main reason behind the dry bulk market’s demise is low demand or tonnage oversupply, which was deemed as the main “culprit” in the past?
The pain will stick around for a number of years even though the worst is behind us. The second dry bulk recovery in recent years from the trough in 2012 lasted until the autumn of 2014 where it became apparent how fragile it was. Mostly brought down by overcapacity, but also a tendency that the demand side would not remain as strong as it had been for the past decade or two. Key trigger behind this is of course the decline in coal imports from China, the still lack of nickel ore and bauxite imports and the fact that most importers (excl. China) is still not back at levels reached in 2007-2008!
If you try to look back on the big fleet growth years of 2009-2012, it grew by an annual average of 13.1%. All of those years the overcapacity increased. In 2013-2014, the fleet grew by an annual average of 5.1%, which is much more balanced, but it does not change the fact that the overcapacity is still here. We need multiple years of demand outstripping supply to turn the tables. The fact that demand may be fading somewhat now with China in an economical transition phase is not making prospects any better.
Can India support the market in a few years’ time, much like China did since the early 2000’s?
India is becoming more and more important to the dry bulk market, but they are still not to be seen as “a new China”. The two nations are very different and their development paths not alike. Unleashing the potential of India will be done at slower pace providing a solid level of demand growth going forward.
Given the challenging conditions which have prevailed so far in the market, when do you expect to see rates back above operating expenses, if not for all, at least for the majority of vessels?
BIMCO forecast freight rates for all dry bulk ships to remain below USD 9,000 per day for March-May. The trend is seen up – meaning that they should all be above OPEX cost levels in May. That is if we assume OPEX between USD 4,500 per day for the Handies going up to USD 7,500 for the Capes.
Looking at OPEX alone means Handies, which is making USD 5,766 per day in the current market, and Supras, which is making USD 6,772 per day, is getting OPEX covered. Panamaxes and Capesizes are not.
Beyond OPEX, you need to look at capital costs too. Interests, repayments, and/or depreciations on the fleet often means more to profitability than OPEX does. So in order to be “back into the black” all costs must be covered – freight rates must reach OPEX times two or three, as a rule of thumb, to earn money for supporting a going concern.
How important has the fall in bunker prices been for shipping companies, given the reduction of their operating costs? Would we have seen more bankruptcies in the segment, according to your view?
Cutting the bunker costs in halves is definitely a sizeable cost reduction on the voyage related expenditures. A cost reduction for the one paying for the fuel, that is. So who does that?
Mostly the spot operators working on a USD per tonnes basis, paying the fuel themselves, reap the benefits. So reaping the benefits of a falling cost item is a matter of negation skills too. In case your ship is out on charter, the charterer gets the cost reduction, as the owner is not paying voyage related expenditures. OPEX is only impacted to a minor extent as the price for lubricants may follow the oil price down somewhat.
Will the Capesize segment lead the way “out of the mud” once more?
Without doubt. Why? Because the demand picture as we see at BIMCO is very much biased towards the larger ship sizes of Panamax and Capesizes, whereas the demand situation for the two smaller segments is more slow growing. Bear in mind though that the current drop in rates was also lead by Capes, indicating a “normalized” market condition, but as Capes also took the deepest dive it becomes clear that overcapacity is still significant also for Capesize segment.
In this market environment, which options have ship owners to cut their losses? Out of demolition, slow steaming, or lay ups, which is the preferable choice at the moment?
All options are open, but the only significant one and most widely applied is slow steaming. Fortunately also the most effective one to counterbalance oversupply. Downside however is that is has a temporary nature as compared to demolition of a ship, which has a permanent effect on fleet growth, nominal and actual.
Demolition is also being used as a tool to turn around fortunes. The poor condition of the markets means BIMCO is forecasting total volume of dry bulk ship capacity to go higher than in 2014. Our estimate is 19m DWT for 2015 with some 8m DWT scrapped already.
In terms of investments, have asset prices adjusted accordingly either in the S&P or the newbuilding markets? Is it a good time to invest in modern tonnage, price-wise?
Newbuilding prices have not hit the floor yet; they are still by some distance higher than in 2012. Second hand prices have tumbled the most with all but Capesizes now below the 2012-lows. Capes being on par. Second hand prices has gone down by 40% over the past year, with older ships taking the biggest hits. Is now a time to invest, price-wise? Well, the return on investment seems to be potentially higher elsewhere. Despite many reasons to pick a newbuilt instead of a second hand – the eventual arrival of a more balanced market would all other things being equal be postponed by adding more tonnage to the market without removing the equivalent capacity. Should you be in need of extra tonnage, the market would be better off if those ships are found in the second hand market.
Source: Nikos Roussanoglou, Hellenic Shipping News
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Tuesday, 10 March 15
FOB NEWCASTLE COAL SWAPS HEADING SOUTH
COALspot.com: API 5 FOB Newcastle Coal swap for Q2’ 2015 delivery declined US$ 0.24 per MT (-0.47%) month over month and US$ 1.52 (-2.93%) we ...
Tuesday, 10 March 15
CFR SOUTH CHINA POWER-STATION COAL SWAPS DECLINE
COALspot.com: API 8 CFR South China Coal swap for Q2’ 2015 delivery fell US$ 0.42 (-0.74%) per MT month over month and declined US$ 1.00 &nbs ...
Monday, 09 March 15
INDONESIA GREETS INDIA RATE CUT AS GOOD FOR EXPORTS - GLOBEASIA
Indonesian commodity producers and economists have hailed the Indian central bank’s rate cut as good for boosting exports from Southeast Asia ...
Monday, 09 March 15
CHINA'S SUPREME COURT ISSUES NEW JUDICIAL INTERPRETATION ON SHIP ARREST AND JUDICIAL SALE OF SHIPS - GARD
KNOWLEDGE TO ELEVATE
China is not traditionally a popular jurisdiction for ship arrest. However, Members and clients with ships calling at por ...
Monday, 09 March 15
CHINA'S IMPORTS - NEVER MORE IMPORTANT TO SHIPPING? - CLARKSONS
Over the last 15 years China has led maritime forecasters a right old dance. In 2002, rumours that Chinese iron ore imports were about to take off ...
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- Mintek Dendrill Indonesia
- GMR Energy Limited - India
- Wilmar Investment Holdings
- Indo Tambangraya Megah - Indonesia
- Ministry of Mines - Canada
- LBH Netherlands Bv - Netherlands
- Neyveli Lignite Corporation Ltd, - India
- IHS Mccloskey Coal Group - USA
- ASAPP Information Group - India
- Baramulti Group, Indonesia
- Cement Manufacturers Association - India
- Rio Tinto Coal - Australia
- Vedanta Resources Plc - India
- Oldendorff Carriers - Singapore
- Parliament of New Zealand
- Tamil Nadu electricity Board
- CIMB Investment Bank - Malaysia
- Africa Commodities Group - South Africa
- Minerals Council of Australia
- AsiaOL BioFuels Corp., Philippines
- Mjunction Services Limited - India
- Electricity Generating Authority of Thailand
- Sakthi Sugars Limited - India
- Global Business Power Corporation, Philippines
- Energy Link Ltd, New Zealand
- Romanian Commodities Exchange
- Binh Thuan Hamico - Vietnam
- Salva Resources Pvt Ltd - India
- Coastal Gujarat Power Limited - India
- Aditya Birla Group - India
- Petrochimia International Co. Ltd.- Taiwan
- Samtan Co., Ltd - South Korea
- Bukit Baiduri Energy - Indonesia
- Sarangani Energy Corporation, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Coal and Oil Company - UAE
- Orica Mining Services - Indonesia
- London Commodity Brokers - England
- TeaM Sual Corporation - Philippines
- Electricity Authority, New Zealand
- The Treasury - Australian Government
- Bukit Asam (Persero) Tbk - Indonesia
- Interocean Group of Companies - India
- Pipit Mutiara Jaya. PT, Indonesia
- Kumho Petrochemical, South Korea
- Miang Besar Coal Terminal - Indonesia
- Global Coal Blending Company Limited - Australia
- Chamber of Mines of South Africa
- Bulk Trading Sa - Switzerland
- Bahari Cakrawala Sebuku - Indonesia
- Petron Corporation, Philippines
- Ministry of Transport, Egypt
- Meralco Power Generation, Philippines
- Leighton Contractors Pty Ltd - Australia
- Formosa Plastics Group - Taiwan
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Price Waterhouse Coopers - Russia
- Central Electricity Authority - India
- Central Java Power - Indonesia
- Bayan Resources Tbk. - Indonesia
- Timah Investasi Mineral - Indoneisa
- Eastern Energy - Thailand
- Vizag Seaport Private Limited - India
- Malabar Cements Ltd - India
- Deloitte Consulting - India
- Merrill Lynch Commodities Europe
- Mercator Lines Limited - India
- Sindya Power Generating Company Private Ltd
- Straits Asia Resources Limited - Singapore
- Iligan Light & Power Inc, Philippines
- PNOC Exploration Corporation - Philippines
- Trasteel International SA, Italy
- Edison Trading Spa - Italy
- Heidelberg Cement - Germany
- Eastern Coal Council - USA
- Orica Australia Pty. Ltd.
- India Bulls Power Limited - India
- IEA Clean Coal Centre - UK
- The University of Queensland
- Chettinad Cement Corporation Ltd - India
- Sojitz Corporation - Japan
- Coalindo Energy - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Antam Resourcindo - Indonesia
- Xindia Steels Limited - India
- The State Trading Corporation of India Ltd
- Singapore Mercantile Exchange
- Meenaskhi Energy Private Limited - India
- Grasim Industreis Ltd - India
- Rashtriya Ispat Nigam Limited - India
- Bharathi Cement Corporation - India
- Banpu Public Company Limited - Thailand
- Mercuria Energy - Indonesia
- Renaissance Capital - South Africa
- Offshore Bulk Terminal Pte Ltd, Singapore
- Power Finance Corporation Ltd., India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Directorate General of MIneral and Coal - Indonesia
- Maheswari Brothers Coal Limited - India
- Posco Energy - South Korea
- Parry Sugars Refinery, India
- Riau Bara Harum - Indonesia
- Pendopo Energi Batubara - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Krishnapatnam Port Company Ltd. - India
- Siam City Cement PLC, Thailand
- Indian Oil Corporation Limited
- Planning Commission, India
- Dalmia Cement Bharat India
- Thiess Contractors Indonesia
- Independent Power Producers Association of India
- Billiton Holdings Pty Ltd - Australia
- Economic Council, Georgia
- Barasentosa Lestari - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Kartika Selabumi Mining - Indonesia
- Altura Mining Limited, Indonesia
- Aboitiz Power Corporation - Philippines
- Attock Cement Pakistan Limited
- Indian Energy Exchange, India
- Bhushan Steel Limited - India
- Ambuja Cements Ltd - India
- White Energy Company Limited
- Australian Commodity Traders Exchange
- Therma Luzon, Inc, Philippines
- Videocon Industries ltd - India
- Metalloyd Limited - United Kingdom
- Manunggal Multi Energi - Indonesia
- Global Green Power PLC Corporation, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Larsen & Toubro Limited - India
- Semirara Mining Corp, Philippines
- Tata Chemicals Ltd - India
- Indonesian Coal Mining Association
- Ceylon Electricity Board - Sri Lanka
- Carbofer General Trading SA - India
- Bhatia International Limited - India
- MS Steel International - UAE
- International Coal Ventures Pvt Ltd - India
- Sree Jayajothi Cements Limited - India
- Toyota Tsusho Corporation, Japan
- SN Aboitiz Power Inc, Philippines
- Jindal Steel & Power Ltd - India
- Anglo American - United Kingdom
- Intertek Mineral Services - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- European Bulk Services B.V. - Netherlands
- Georgia Ports Authority, United States
- Maharashtra Electricity Regulatory Commission - India
- Ind-Barath Power Infra Limited - India
- CNBM International Corporation - China
- SMC Global Power, Philippines
- Lanco Infratech Ltd - India
- OPG Power Generation Pvt Ltd - India
- Savvy Resources Ltd - HongKong
- Medco Energi Mining Internasional
- Essar Steel Hazira Ltd - India
- SMG Consultants - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Siam City Cement - Thailand
- Alfred C Toepfer International GmbH - Germany
- Simpson Spence & Young - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Makarim & Taira - Indonesia
- PTC India Limited - India
- South Luzon Thermal Energy Corporation
- Jorong Barutama Greston.PT - Indonesia
- Wood Mackenzie - Singapore
- Kepco SPC Power Corporation, Philippines
- Thai Mozambique Logistica
- Goldman Sachs - Singapore
- San Jose City I Power Corp, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- VISA Power Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- ICICI Bank Limited - India
- Kobexindo Tractors - Indoneisa
- GAC Shipping (India) Pvt Ltd
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Standard Chartered Bank - UAE
- Gujarat Mineral Development Corp Ltd - India
- Cigading International Bulk Terminal - Indonesia
- Borneo Indobara - Indonesia
- GVK Power & Infra Limited - India
- Australian Coal Association
- Jaiprakash Power Ventures ltd
- Port Waratah Coal Services - Australia
- Directorate Of Revenue Intelligence - India
- Kideco Jaya Agung - Indonesia
- Karaikal Port Pvt Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Bangladesh Power Developement Board
- Holcim Trading Pte Ltd - Singapore
- Kaltim Prima Coal - Indonesia
- PowerSource Philippines DevCo
- Uttam Galva Steels Limited - India
- Bhoruka Overseas - Indonesia
- Kapuas Tunggal Persada - Indonesia
- McConnell Dowell - Australia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Bukit Makmur.PT - Indonesia
- Commonwealth Bank - Australia
- Gujarat Sidhee Cement - India
- Ministry of Finance - Indonesia
- Madhucon Powers Ltd - India
- Globalindo Alam Lestari - Indonesia
- New Zealand Coal & Carbon
- Indogreen Group - Indonesia
- Agrawal Coal Company - India
- TNB Fuel Sdn Bhd - Malaysia
- Star Paper Mills Limited - India
- Indika Energy - Indonesia
- Latin American Coal - Colombia
- Sical Logistics Limited - India
- Marubeni Corporation - India
- Energy Development Corp, Philippines
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